Share the Wealth? : City Harbors Hopes of Getting More of Port’s Profits

As the city’s wallet gets thinner, the ever-fat profits of the Port of Long Beach are attracting more and more hungry glances from local leaders longing for extra cash.

The numbers say it all. While the highly successful port, a self-supporting department of the city, ended the last fiscal year with a $64-million profit, the city itself spent $7 million more than it took in. And while city officials have struggled to fund such basic services as police protection, harbor commissioners didn’t bat an eyelash when they spent $1 million renovating their boardroom a few years ago.

Such jarring contrasts have fueled talk of tapping into the rich port enterprise, despite a web of legal restraints and the port’s considerable political muscle.

“The bottom line is they make big money at the port and they impact the city in big ways,” said Councilman Warren Harwood, who has persistently argued that the port district should be contributing more to city coffers.

He and others complain that the port’s wealth mainly benefits the port and not the city--which has not only lost private industrial land to the port’s expansion but must also put up with rumbling cargo trains, harbor pollution and thousands of freight trucks a day clogging its freeways.

“The benefit is not there for the community,” contended Councilman Ray Grabinski. “All I’m asking is that they be fair with the taxpayer and give them an equitable return.”

Even Mayor Ernie Kell, a longstanding defender of port interests, said he has been talking informally with port commissioners in recent months about ways that the port might assist the city financially.

“Now that we’re entering more difficult times, we’re going to get more creative in getting the port to help the city,” Kell remarked, saying it was too early in his discussions to elaborate.

At the same time, the port’s recent role in the unsuccessful negotiations for a Disney waterfront theme park has sparked grumbling that the port is too independent. “They don’t associate themselves with the city,” complained one councilman. “I think there are people (in City Hall) who are becoming less and less tolerant of that attitude.”

The Walt Disney Co. cited a lengthy and costly state and federal approval process in announcing its decision to drop plans to build a $3-billion aquatic theme park in the port district. But some political insiders groused that Disney may have been further discouraged by a port more concerned with protecting its interests than the city’s.

Long Beach is by no means the only community to cast a covetous eye on port riches. From Oakland to San Diego, financially strapped port cities all over California are looking to their more prosperous harbor operations as they explore every nook and cranny for additional funds.

Municipal attempts to reach into port pockets are limited by complex regulations, however, foremost among them state law. Under tidelands trust laws rooted in ancient public-land doctrines, local income from port operations must be spent on activities related to commerce, navigation or fisheries. Cities have been granted stewardship of the tidelands for the greater public good, but they get their hands slapped if they try to scoop up port money for their own general expenses.

To significantly loosen those tidelands restraints would require a change in the state Constitution, said Curtis Fossum, senior staff counsel for the State Lands Commission. And even if the Constitution were tinkered with, there would still be federal restraints.

The ports, for their part, argue that they operate in the highly competitive Pacific Rim environment and need their profits to maintain successful operations vital to commerce and thousands of jobs.

Long Beach port authorities argue that they must continue to invest liberally in facilities and new technology to retain the port’s position as the highest-tonnage maritime complex on the West Coast and the second-busiest container operation in the nation, behind Los Angeles.

“The port has a tremendous income but also an enormous outlay,” said Joel Friedland, president of the Long Beach Harbor Commission, a five-member board appointed by the mayor to oversee the port.

Friedland and others also argue that the port has already done a lot for the city. It took over the Queen Mary attraction, which had cost the city millions of dollars in losses, plowed $30 million into development of the World Trade Center site downtown and is now financing an $80-million expansion of the Convention Center--all projects permitted under the tidelands guidelines.

“The port has been a very generous contributor to the well-being of the city,” Friedland stressed.

Port proponents further point to the $8 million a year the harbor pays for its share of city services provided in the port district--such as fire protection--and to the approximately $2.7 million a year harbor tenants pay in local taxes.

Still, some say that’s not enough.

In 1988, City Auditor Robert Fronke issued a report recommending that the local business-license tax be changed to collect more from port tenants. Because business license fees in Long Beach are calculated according to the number of employees working for a firm, the highly automated shipping companies in the harbor are charged a fraction of the fees paid by more labor-intensive industries.

For instance, all the harbor tenants pay a combined total of $60,000 a year in local business-license fees, compared to the $215,000 paid annually by McDonnell Douglas alone for its Long Beach aerospace operations.

Fronke’s suggestion that the city charge port tenants according to their gross receipts--to bring in another $1 million a year--went nowhere. Harwood took up the gross-receipts cause again last year, complaining bitterly that powerful port interests were being protected because they have contributed liberally to local political campaigns, especially the mayor’s.

“It’s called a free ride,” Harwood declared.

Shippers howled in protest, and Kell, denying any favoritism, reaffirmed his opposition to increasing business fees, saying it would hurt the port’s competitiveness.

Countered Harwood: “I think we have some kind of mythology that you can’t tax a port tenant or they’re going to go to Tacoma (Wash.), and I say, ‘Baloney.’ ”

The idea nonetheless remains on the back burner.

Harwood has also argued--thus far to no avail--that the city should take advantage of a provision allowing the Harbor Department to transfer a portion of any surplus funds to the city’s Tidelands Operating Fund, which is used to maintain local beaches and waterways.

Councilman Grabinski said all the ports in the state should devise a uniform charge of some sort--perhaps a small tariff on incoming goods. If all the ports imposed it, Grabinski reasons, none would be left at a competitive disadvantage.

“(Shippers are) using our port, our freeways, our arteries to carry goods for the whole damn country,” said Grabinski, arguing that additional charges are more than justified.

Outside Long Beach, cities have gone to considerable lengths to get more port money.

In Oakland, the city not only got its port to repay bonds floated for harbor and airport development, it has received millions of dollars from the port to make up for the interest the city would have earned had it invested the bond money on its own behalf.

The cash-poor city of Imperial Beach gave its beachfront to the San Diego Unified Port District in 1990, thereby saving more than $1 million a year in upkeep.

San Diego and four neighboring cities, including Imperial Beach, also recently struck a deal with the San Diego port to greatly increase the port’s payments for public services on port property. Although the agreement is being rewritten to satisfy state concerns, the cities still expect to reap about $4 million a year.

A couple of years ago, Los Angeles administrators went over the services they provide to their port with a fine-toothed comb, concluding that the port owed the city treasury another $2 million a year, for an annual total of $13.7 million. Los Angeles is even charging the port for library positions involved with maritime materials.

Some city leaders in Los Angeles would like a lot more money than that. There is growing pressure to bring the Los Angeles port under greater city control and to get it to contribute more to the city treasury. Just how that will be done remains unclear.

Similar efforts in Long Beach are also ill-defined, but they are likely to continue.

Observed Councilman Les Robbins: “I think it’s probably safe to say that there may be some renewed interest on the part of the entire council in getting every dime out of the port we can.”

Port of Long Beach

Opened: 1911

Operating budget: $70 million

Capital budget: $348 million

Profit: $64 million

Cargo: 72.4 million metric tons handled in 1990. Biggest volume among West Coast ports.

Containers: 1.6 million 20-foot containers a year. Second most in the nation (Port of Los Angeles is first in volume).

Cargo value: An estimated $50 billion worth of goods is shipped through the Port of Long Beach every year.

Source: Port of Long Beach